assigment 4

Satisfactory Essays
Assignment 4
Question 1
How much money a consumer is willing to pay for each of the attributes?
This is of course not really possible, as a laptop without a hard disk or a CPU is a useless laptop. However, what you can describe is how much one is usually willing to pay to upgrade a laptop with one unit of the attribute. You can derive the willingness to pay for an attribute pay comparing the gain in utility from an attribute by the payment that compensates this gain in utility. In other words, what is the amount of money that has the same utility value as the attribute?

U = 0.293 + 0.006*HD + 2.199*MEM+2.082*CPU + 0.242*SCR - 0.887*W - 0.006*PRICE
Answer model 1
For the Hard Disk a increase of Gb of one will give a increase of willingness to pay of one. The reason is because the coefficients are the same. So you divide the coefficient of HD through the coefficient of price and the you get the difference in price so the willingness to pay. For MEM this means 2.199/0,006 (366,5). So people are willing to pay a 366,5 euro extra for one extra Gb memory. In the table below it is done for the rest of the variables. In the last case people are willing to pay less in the laptop becomes heavier. You can do it like this because the variables are made continuous.
Coefficient
Coefficient price
Extra willingness to pay
HD 0,006
-0,006
1 euro
MEM 2,199
-0,006
366,5 euro
CPU 2.082
-0,006
347 euro
SCR 0,242
-0,006
insignificant
W -0,887
-0,006
- 147,83 euro

U = 0.362 + 0.004*HD + 2.266*MEM + 0.436*CPU - 0.065*SCR - 1.368*W - 0.004*PRICE + 0.005*HDGROUP + 0.225*MEMGROUP + 4.008*CPUGROUP +0.684*SCRGROUP +0.569*WGROUP -0.007*PRICEGROUP
Answer model 2
For model 2 for the main group, so where the dummy is one, you can’t say anything about the willingness to pay because the price in this case is insignificant.
For the young group this is different because the interaction with the group and price is significant. To get this effect we have to

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